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Operation Dessert Storm

When big conglomerates began circling Ben & Jerry's Homemade earlier this year, there was general alarm among ice cream progressives. Wavy Gravy spoke at a rally. Supporters flocked to savebenandjerrys.com to bear witness. "May Ben and Jerry find the strength to fight. Good people, who own good companies, are too rare. Keep the faith!" Angel Head wrote from Des Moines.

Much seemed to be at stake. In a mythic story, 1960s-vintage lefties Ben Cohen and Jerry Greenfield moved to Vermont and set up an ice cream business, then decided to make that business a conduit for charity and social initiatives. Many consumers take comfort in seeing Ben and Jerry smiling from the back of their colorful cartons, sentinels of decency in a shopping cart full of wares from companies with tobacco holdings or worse. Would a takeover spell the end of conscientious capitalism?

We'll find out. On April 12, Unilever--the Anglo-Dutch conglomerate behind Q-Tips, Ragu spaghetti sauce, and Lipton tea--agreed to buy Ben & Jerry's. Responding to the outcry at the sale, the founders insisted they'd preserve the social spirit of their company, via an independent board. And the deal did feature striking concessions from Unilever, considering that the company it's devouring collects annual revenues that are less than 1 percent of Unilever's total sales. For example, Ben & Jerry's directors can sue Unilever at the conglomerate's expense if it violates no-layoff agreements in the next two years, and Cohen and Greenfield will advise other Unilever product divisions on social innovation.

But Steve Hingtgen, a Vermont state legislator from Bernie Sanders's Progressive Party, says the company's appeal will plummet once people discover it has become part of a multinational. And it's an open question whether Ben & Jerry's will be able to maintain its unique blend of profit and principle as part of a multinational conglomerate. After all, many of its policies would not be tolerated in a traditional corporation. What normal company gives away 7.5 percent of its pretax profits, or buys cream from in-state farmers instead of mega-dairies that charge lower prices, or hires formerly homeless people to staff retail stores, or buys brownies from a bakery that trains poor residents of Yonkers?

Perhaps with these questions in mind, Ben & Jerry's board initially contemplated a deal that would have allowed the company to preserve its independence, dividing 72 percent of the stock between Cohen and a supportive investor group called Meadowbrook Lane Capital (which has ties to Cohen's confederates in the Social Venture Network) and giving Unilever only the remaining 28 percent, while tak-ing advantage of the larger company's distribution muscle. But the principals ultimately decided to forsake their independence. Good thing, too: Stubbornly clinging to independence might well have spelled financial ruin.

Cohen and Greenfield say they would have preferred to stay independent--but not if it would have required combating lawsuits. More than a third of Ben & Jerry's stock belongs to institutional investors like Credit Suisse Asset Management, who manages retirement funds and endowments and cannot legally tolerate sub-par returns. Shareholders would have sued Ben & Jerry's to its last penny after reading about how the board had spurned Unilever's generous buyout offer. (Indeed, the company divulges in public filings that three parties had filed suits against it while the board was discussing going private.)

But isn't capitulating to the takeover tantamount to selling out, an egregious offense according to the very values Ben & Jerry's has established for itself? After all, savebenandjerrys.com founder Garret LoPorto says one thing Cohen taught him when the two worked together on nonprofit Web sites is that getting capital is cheap; creating change is expensive.

Actually, under the circumstances, the company probably made the best possible decision. Its stock had sagged in 1999 as revenue growth slowed. The super-premium ice cream market is, according to investment counselor Peter Kinder, a "cutthroat business." And Ben & Jerry's deliberately intimate scale--which keeps all its operations in Vermont and which encourages more questions about the consistency of fudge than the consistency of profits at its shareholders' meetings--probably stymied its growth. Some of its innovations, such as buying nuts from Brazilian rainforests and coffee from poor Mexican farmers, undermined its capacity for profit. And others didn't last: The company waived a rule keeping its highest salary to seven times its lowest salary when it hired its first outside CEO in 1995. Finally, the company had been dependent, perhaps fatally so, on larger rivals--Dreyer's, Pillsbury, and Nestlé--for its ice cream distribution. A company's access to freezer cases determines how many consumers can get their hands on its product. With weak stock and little capital, Ben & Jerry's could scarcely fend off these distributor-rivals, two of which had also submitted bids to take over the company earlier this year. Indeed, without Unilever's protection, rivals might have invested to crush Ben & Jerry's.

What's more, Unilever surely knows that what generates Ben & Jerry's brand loyalty is its social commitment; it's what makes you likely to grab Chunky Monkey instead of Häagen Dazs chocolate (Häagen Dazs is owned by Diageo, which owns Burger King and Guinness) when shopping for a special treat. Indeed, the company's charitable donations are almost sure to grow appreciably now; curtailing them would destroy consumers' fondness for the brand. Buying Ben & Jerry's and snipping its charity pay-out would be akin to buying McDonald's and dismantling all the golden arches.

Peter Kinder, whose firm Kinder, Lydenberg, Domini conducts social research for institutional investors, says any buyer would be foolish to tamper with Ben & Jerry's culture. But that culture may have been changing already, growing more corporate in the aftermath of its decision to become a publicly traded company in 1984: For example, 26 workers received notice last year when the company decided to make ice cream bars at a third-party plant. Ben & Jerry's offered these workers new jobs, but some chose not to relocate. Okay, so we're not talking "Chainsaw Al" Dunlap here; still, this sort of thing didn't used to happen at all at Ben & Jerry's.

In any event, progressive ice cream eaters may feel ambivalent for a while about the faces staring out at them from their Cherry Garcia. Must all business enterprises, to stay financially viable, become amoral profit machines? Or are the trade-offs between business and social values more complex? For now Ben & Jerry's is striving, as it always has, to prove that a corporation can deliver benefits-- not just profits--to society. Its voice may be somewhat muted within its stately new corporate dwelling. But when they see that the choice was between the company's getting quieter and its falling completely silent, consumers may find Ben & Jerry's new arrangement more palatable.